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TMI Blog2024 (3) TMI 552X X X X Extracts X X X X X X X X Extracts X X X X ..... a credit entry, then the result is as if that credit entry was never made. In other words, the entire cenvat credit availed on common input services being debited before adjudication and at the time of adjudication, it was as if such credit was never availed. Now on the question whether subsequent to the activity of trading, such debit can be effected. Hon ble Delhi High Court has held that since the rules have not provided as to how attributable cenvat credit is to be debited and in advance it would not be known as to how much quantum of trading will take place, it is logical that the attributable cenvat credit is debited after the trading activity is over, may be once in a quarter or once in six months - the appellant had debited the enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s well as trading purposes. Appellant was not maintaining separate accounts in respect of the components of service tax paid on input services going into the manufacturing activity and trading activity. Therefore, appellant was issued with a show cause notice dated 17.07.2014 for the period from July 2009 to March 2014. It was stated in the said show cause notice at para 8 that the appellant had availed common input service cenvat credit to the tune of Rs.46,08,193/- during the above stated period. It was also stated that the appellant was not maintaining separate account in respect of common input services going into manufacture and trading. It was further stated that as provided under sub-rule (3) of Rule 6 of Cenvat Credit Rules, 2004, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit availed on common input services was debited by the appellant. Therefore, it amounts to not availing cenvat credit on common input services and, therefore, the confirmation of demand should not sustain. 3. Heard the learned AR for Revenue. Learned AR has submitted a copy of ruling by Hon ble High Court of Delhi in the case of Lally Automobiles Pvt. Ltd. reported in 2018 (17) GSTL 422 (Del.) and submitted that the said ruling by Hon ble High Court has been affirmed by Hon ble Supreme Court as reported in 2019 (24) GSTL J115 (SC) and submitted that penalty on the appellant may be sustained. 4. We have carefully gone through the record of the case and submissions made. We note that the appellant has taken cenvat credit of Rs.46,08,193/- du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ducts which would be exempt from duty by a notification (e.g. an end use notification) and in respect of which it is not reasonably possible to segregate the inputs, the manufacturer may be allowed to take credit of duty paid on all inputs used in the manufacture of the final products, provided that credit of duty paid on the inputs used in such exempted products is debited in the credit account before the removal of such exempted final products. This circular deals with a case where the manufacturer produces dutiable final products and also final products which are exempt from duty and it is not reasonably possible to segregate inputs utilised in manufacture of the dutiable final products from the final products which are exempt from duty. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edit availed on common input services being debited before adjudication and at the time of adjudication, it was as if such credit was never availed. Now on the question whether subsequent to the activity of trading, such debit can be effected. For the said purpose, we reproduce para 16 of the ruling by Hon ble Delhi High Court in the case of Lally Automobiles Pvt. Ltd. (supra). 16. Therefore, the issue is whether the assessee could claim the credit on input which were not services. Input credits can be used for payment of service on output service provided such services are used to provide output services. Undoubtedly, there cannot be an exact correlation between one kind of input and corresponding. That is the reason the Rules cover situat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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